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Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

17. Commitments and Contingencies

Environmental Matters

Due to the nature of our business, certain of our subsidiaries’ operations are subject to numerous existing and proposed laws and governmental regulations designed to protect human health and the environment, particularly regarding plant wastes and emissions and solid waste disposal. Our consolidated environmental liabilities on an undiscounted basis were $22 million and $13 million as of December 31, 2022 and 2021, respectively, primarily within our Energy segment, which are included in accrued expenses and other liabilities in our consolidated balance sheets. We do not believe that environmental matters will have a material adverse impact on our consolidated results of operations and financial condition.

Energy

CVR Energy’s indirect wholly-owned subsidiary, Coffeyville Resource Refining & Marketing, LLC (“CRRM”) is party to proceedings relating to claims by United States Department of Justice (the “DOJ”) on behalf of the U.S.

Environmental Protection Agency (the “EPA”) and the State of Kansas, acting by and through Kansas Department of Health and Environment (“KDHE”) a 2012 Consent Decree (“CD”) between CRRM, the United States (on behalf of the EPA) and KDHE at its Coffeyville refinery primarily relating to flares and seeking stipulated penalties under the CD of $6.8 million (the “Stipulated Claims”), which amount CRRM previously deposited into a commercial escrow account, which escrowed funds are legally restricted for use and are included in other assets in our condensed consolidated balance sheets. After the United States District Court for the District of Kansas (“D. Kan.”) denied CRRM’s petition for judicial review of the Stipulated Claims, CRRM appealed the D. Kan order to the United States Court of Appeals for the Tenth Circuit (the “10^th Circuit”), which appeal was stayed by the 10^th Circuit but remains pending. CRRM is also party to proceedings brought by the DOJ, on behalf of the EPA, and KDHE in the D. Kan alleging violations of the CAA, CRRM’s Title V permit, the Kansas State Implementation Plan, Kansas law, Part 63 of the National Emission Standards for Hazardous Air Pollutants from Petroleum Refineries Subparts CC and R (“NESHAP”) and Coffeyville Resources Refining and Marketing, LLC’s permits relating to flares, heaters, and related matters and seeking civil penalties, injunctive and related relief under an amended complaint filed by the United States (on behalf of the EPA) and KDHE on February 17, 2022 (collectively, the “Statutory Claims”). Motion practice in the lawsuit filed in the D. Kan by the United States (on behalf of the EPA) and KDHE, which complaint was amended on February 17, 2022 (the “Amended Complaint”), is ongoing. In October 2022, the D. Kan granted CRRM’s motion to dismiss KDHE’s request for penalties under Kansas law but denied its motion to dismiss all other Statutory Claims. The D. Kan. subsequently held a scheduling conference in December 2022 and entered a scheduling order in January 2023. Under that schedule, the case will proceed through discovery in 2023 and 2024. The court will schedule a trial in the case at a later date. In January 2023, the United States (on behalf of the EPA) and the State of Kansas, through KDHE, amended their complaint before the D. Kan. in connection with their allegations that CRRM violated the CAA, the Kansas State Implementation Plan, Kansas law, 40 C.F.R. Part 63 and CRRM’s permits relating to flares, heaters, and related matters and seeking civil penalties, injunctive and related relief (collectively, the “Statutory Claims”), adding certain claims including relating to an alleged failure to comply with certain emissions reporting requirements for 2016. Negotiations and proceedings remain ongoing relating to the Statutory Claims, and also relating to the Stipulated Claims being sought by the United States (on behalf of the EPA) and the State of Kansas (through KDHE) in connection with their allegations that CRRM violated the CAA and a 2012 Consent Decree between CRRM, the United States (on behalf of the EPA) and KDHE, following CRRM’s appeal to the United States Court of Appeals for the Tenth Circuit of the denial by D. Kan. of CRRM’s petition for judicial review of the Stipulated Claims. As negotiations and proceedings relating to the Stipulated Claims and the Statutory Claims are ongoing, CVR Energy cannot at this time determine the outcome of these matters, including whether such outcome, or any subsequent enforcement or litigation relating thereto would have a material impact on our Energy segment’s financial position, results of operations, or cash flows.

As of December 31, 2022 and 2021, our Energy segment had environmental accruals of $22 million and $12 million, respectively, representing estimated costs for future remediation efforts at certain sites.

Renewable Fuel Standard

CVR Energy’s obligated-party subsidiaries are subject to the Renewable Fuel Standard (“RFS”) implemented primarily by the EPA which requires refiners to either blend renewable fuels into their transportation fuels or purchase renewable fuel credits, known as RINs, in lieu of blending. CVR Energy’s obligated subsidiaries are not able to blend the substantial majority of its transportation fuels and, unless their obligations are waived by the EPA, has to purchase RINs on the open market and may have to obtain waiver credits for cellulosic biofuels or other exemptions from the EPA, to the extent available, in order to comply with the RFS. CVR Energy’s obligated-party subsidiaries have filed a number of petitions in the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) and the United States Court of Appeals for the District of Colombia Circuit (the “DC Circuit”) challenging the EPA’s April 2022 and June 2022 alternate compliance rulings and the EPA’s Final Rule filed in July 2022 establishing renewal volume obligation (“RVO”), and, with respect to Wynnewood Refining Company, LLC (“WRC”), challenging EPA’s denial of small refinery exemptions (“SREs”) sought by WRC for the 2017 through 2021 compliance periods, also intervened in an action filed by certain biofuels producers relating to the RFS. In late 2022, the Fifth Circuit denied the EPA’s motions to stay the SRE Denial Lawsuits. In February 2023, WRC filed a motion in the Fifth Circuit seeking a stay of enforcement

of the RFS against WRC pending resolution for the denial of SREs lawsuits. As each of these proceedings is in its earliest stages, we cannot currently estimate the outcome, impact or timing of resolution of these matters. However, while CVR Energy intends to prosecute these actions vigorously, if these matters are ultimately concluded in a manner adverse to CVR Energy, they could have a material effect on our Energy business’ financial position, results of operations, or cash flows.

For the years ended December 31, 2022, 2021 and 2020, our Energy segment recognized an expense of $435 million, $435 million and $190 million, respectively, for CVR Energy’s obligated-party subsidiaries’ compliance with the RFS (based on our Energy segment’s revised 2020 and finalized 2021 and 2022 annual RVO and excluding the impacts of any exemptions or waivers to which our Energy segment may be entitled). These recognized amounts are included in cost of goods sold in our consolidated statements of operations and represent costs to comply with the RFS obligation through purchasing of RINs not otherwise reduced by blending of ethanol and biodiesel. At each reporting period, to the extent RINs purchased or generated through blending are less than the RFS obligation (excluding the impact of exemptions or waivers to which our Energy segment may be entitled), the remaining position is marked-to-market using RIN market prices at period end. As of December 31, 2022 and 2021, the RFS position for CVR Energy’s obligated-party subsidiaries was $692 million and $494 million, respectively, which is included in accrued expenses and other liabilities in our consolidated balance sheets.

Litigation

From time to time, we and our subsidiaries are involved in various lawsuits arising in the normal course of business. We do not believe that such normal routine litigation will have a material effect on our financial condition or results of operations.

Energy

Call Option Lawsuits –In December 2022, the Delaware Court of Chancery (the “Chancery Court”) approved the final settlement of the consolidated lawsuits (collectively, the “Call Option Lawsuits”) filed by purported former unitholders of CVR Refining, LP on behalf of themselves and an alleged class of similarly situated unitholders against CVR Energy and certain of its affiliates (the “Call Defendants”) relating to CVR Energy’s exercise of the call option under the CVR Refining, LP Amended and Restated Agreement of Limited Partnership assigned to it by CVR Refining’s LP’s general partner including the Stipulation, Compromise and Release (the “Settlement”) entered into by the parties on August 19, 2022. The Settlement of the Call Option Lawsuits had no further impact on our Energy business’ financial position or results of operations beyond the $79 million recognized within Other loss, net for the year ended December 31, 2022 to reflect the estimated probable loss.

On November 28, 2022, the 434th Judicial District Court of Fort Bend County, Texas granted summary judgment in favor of the primary and excess insurers (the “Insurers”) of the Call Defendants in the Insurers’ declaratory judgment action seeking determination that they owe no indemnity coverage for the Call Option Lawsuits in relation to insurance policies that have coverage limits of $50 million. The Company intends to appeal the grant of summary judgment while it concurrently pursues its claims against the Insurers it filed in October 2022 in the Superior Court of the State of Delaware (the “Superior Court”) alleging Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing against their primary and excess insurers (the “Insurers”) relating to their denial of coverage of the Call Defendants’ defense expenses and indemnity, as well as other conduct of the Insurers relating to the Call Option Lawsuits. On January 3, 2023, the Superior Court granted the Call Defendants’ motion for leave to amend its complaint to seek recovery from the Insurers of all of the amounts paid in settlement of the Call Option Lawsuits. As both lawsuits are in their early stages, CVR Energy cannot determine at this time the outcome of these lawsuits, including whether the outcome would have a material impact on our Energy business’ financial position, results of operations, or cash flows.

Other Matters

Pension Obligations

Mr. Icahn, through certain affiliates, owns 100% of Icahn Enterprises GP and approximately 85% of our outstanding depositary units as of December 31, 2022. Applicable pension and tax laws make each member of a “controlled group” of entities, generally defined as entities in which there is at least an 80% common ownership interest, jointly and severally liable for certain pension plan obligations of any member of the controlled group. These pension obligations include ongoing contributions to fund the plan, as well as liability for any unfunded liabilities that may exist at the time the plan is terminated. In addition, the failure to pay these pension obligations when due may result in the creation of liens in favor of the pension plan or the Pension Benefit Guaranty Corporation (the “PBGC”) against the assets of each member of the controlled group.

As a result of the more than 80% ownership interest in us by Mr. Icahn’s affiliates, we and our subsidiaries are subject to the pension liabilities of entities in which Mr. Icahn has a direct or indirect ownership interest of at least 80%, which includes the liabilities of pension plans sponsored by Viskase and ACF Industries LLC (“ACF”), an affiliate of Mr. Icahn. All the minimum funding requirements of the Internal Revenue Code, as amended, and the Employee Retirement Income Security Act of 1974, as amended, for the Viskase and ACF plans have been met as of December 31, 2022. If the plans were voluntarily terminated, they would be underfunded by an aggregate of approximately $32 million as of December 31, 2022. These results are based on the most recent information provided by the plans’ actuaries. These liabilities could increase or decrease, depending on a number of factors, including future changes in benefits, investment returns, and the assumptions used to calculate the liability. As members of the controlled group, we would be liable for any failure of Viskase or ACF to make ongoing pension contributions or to pay the unfunded liabilities upon a termination of the Viskase or ACF pension plans. In addition, other entities now or in the future within the controlled group in which we are included may have pension plan obligations that are, or may become, underfunded and we would be liable for any failure of such entities to make ongoing pension contributions or to pay the unfunded liabilities upon termination of such plans.

The current underfunded status of the pension plans of Viskase and ACF requires them to notify the PBGC of certain “reportable events,” such as if we cease to be a member of the Viskase or ACF controlled group, or if we make certain extraordinary dividends or stock redemptions. The obligation to report could cause us to seek to delay or reconsider the occurrence of such reportable events.

Starfire Holding Corporation (“Starfire”), which is 99.6% owned by Mr. Icahn, has undertaken to indemnify us and our subsidiaries from losses resulting from any imposition of certain pension funding or termination liabilities that may be imposed on us and our subsidiaries or our assets as a result of being a member of the Icahn controlled group. The Starfire indemnity provides, among other things, that so long as such contingent liabilities exist and could be imposed on us, Starfire will not make any distributions to its stockholders that would reduce its net worth to below $250 million. Nonetheless, Starfire may not be able to fund its indemnification obligations to us.

Unconditional Purchase Obligations

Unconditional purchase obligations are primarily within our Energy and Pharma segments. Our Energy segment’s unconditional purchase obligations relate to commitments for petroleum products storage and transportation, electricity supply agreements, product supply agreements, commitments related to CVR Energy’s biofuel blending obligation and various agreements for gas and gas transportation. Our Pharma segment’s unconditional purchase obligations relate to agreements to purchase goods or services from suppliers for the manufacture of its products. The minimum required payments for our Energy and Pharma segments’ unconditional purchase obligations are as follows:


Year		Energy			Pharma

		(in millions)
2023		$	142		$	14
2024			83			13
2025			83			14
2026			77			14
2027			71			15
Thereafter			187			34
		$	643		$	104

CVR Energy is a party to various supply agreements which commit it to purchase minimum volumes of crude oil, hydrogen, oxygen, nitrogen, petroleum coke and natural gas to run its facilities’ operations.